papers/lux-smart-order-routing/sections/07-compliance-aware-routing.tex

\section{Compliance-Aware Routing}
\label{sec:compliance}

\subsection{Pre-Route Compliance Check}

Before allocating order quantity to a venue, the SOR checks compliance at three levels:

\begin{enumerate}[nosep]
  \item \textbf{Security level}: Does the security's transfer restriction policy permit trading on this venue? (e.g., a Reg D security may only trade on US-registered ATS platforms.)
  \item \textbf{Investor level}: Does the investor's accreditation, KYC status, and jurisdiction permit trading on this venue?
  \item \textbf{Venue level}: Is the venue currently accepting orders for this security? (e.g., a venue may pause trading for a corporate action.)
\end{enumerate}

\begin{lstlisting}[language=Go,caption={Pre-route compliance check.}]
func (r *Router) checkCompliance(
    order Order, venue Provider,
) error {
    // Security-level check
    token := r.registry.GetSecurity(order.SecurityID)
    restrictions := token.TransferRestrictions()

    if !restrictions.AllowsVenue(venue.ID()) {
        return fmt.Errorf("security %s: venue %s not permitted",
            order.SecurityID, venue.ID())
    }

    // Investor-level check
    investor := r.registry.GetInvestor(order.InvestorID)
    did := investor.DID()

    for _, jur := range venue.Jurisdictions() {
        if did.Jurisdiction() == jur {
            goto jurisdictionOK
        }
    }
    return fmt.Errorf("investor jurisdiction %s not permitted on venue %s",
        did.Jurisdiction(), venue.ID())
jurisdictionOK:

    if restrictions.RequiresAccreditation() {
        if !did.HasValidCredential("accreditation") {
            return fmt.Errorf("investor %s: accreditation expired", order.InvestorID)
        }
    }

    // Venue-level check
    if !venue.Supports(order.SecurityID) {
        return fmt.Errorf("venue %s does not support security %s",
            venue.ID(), order.SecurityID)
    }

    return nil
}
\end{lstlisting}

\subsection{Cross-Venue Settlement}

When an order is split across multiple venues, settlement occurs independently at each venue. The SOR tracks settlement status and reconciles:

\begin{itemize}[nosep]
  \item \textbf{On-chain venues} (Lux DEX VM, Lux ATS internal): Atomic T+0 settlement on Lux EVM.
  \item \textbf{External ATS platforms}: Settlement per the venue's protocol (typically T+0 to T+2).
  \item \textbf{Traditional venues}: Settlement via DTCC (T+1 for equities).
\end{itemize}

The ATS maintains a settlement ledger that tracks the net position across all venues and reconciles on-chain state with off-chain settlements via the \texttt{position\_reconcile} cron job \cite{lux-ats-architecture}.